How State Exceptions to Employment-at-Will Affect Wages

Abstract

Little research has been conducted on the effects of state adoption of exceptions to the common law doctrine of employment-at-will, which states that both employees and employers have the right to terminate an employment relationship at any time for any reason. I examine how these exceptions affect wages and find that, as predicted, the two are inversely related. All three commonly adopted exceptions are negatively related to the wage rate, with state adoption being associated with up to a three percent reduction in wages.